Which of the following statements concerning bargain purchases (purchase price below fair value of identifiable assets) is correct?

  1. Any previously recorded goodwill on the seller”s books is eliminated and no new goodwill is recorded.
  2. Long-lived assets, including in-process R&D and excluding marketable securities, are recorded at fair market value minus an adjustment for the bargain, under current GAAP.
  3. An extraordinary gain is recorded in the event that all long-lived assets other than marketable securities are reduced to the original purchase price, under current GAAP.
  4. Current assets, long-term investments in marketable securities (other than those accounted for by the equity method), assets to be disposed by sale, deferred tax assets, prepaid assets relating to pension or other post-retirement benefit plans, and assumed liabilities are the only accounts that are always recorded at fair market value, under current GAAP.

Leave a Reply